Legg Mason Names Interim Head as CEO for Turnaround Push

Asset manager Legg Mason Inc named
Joseph Sullivan as its permanent chief executive officer on
Wednesday, picking an insider to staunch outflows from its funds
and smooth relations with its autonomous investment units.

Feb 13 Asset manager Legg Mason Inc named
Joseph Sullivan as its permanent chief executive officer on
Wednesday, picking an insider to staunch outflows from its funds
and smooth relations with its autonomous investment units.

Sullivan had been the company's sales chief and interim CEO,
and his appointment was expected.
Baltimore-based Legg Mason had been seeking a new CEO since Mark
Fetting stepped down under pressure last fall.

Sullivan was also named president and a board member. He had
rejoined Legg Mason in 2008 after working there earlier in his
career.

In addition, Legg Mason named a new board member, Dennis
Kass, who retired last year as CEO of Jennison Associates, an
asset-management unit of Prudential Financial Inc.

The choice of Sullivan, 55, will signal to investors that
Legg Mason is less inclined to embark on a radical restructuring
to address its challenges, analysts have said. The company is
coming off nearly five years of outflows from its funds, and
relations have been strained between the parent firm and some of
its eight semi-autonomous investment units.

"Instead of disrupting the apple cart too much, they went
with the guy that they knew, but brought in an outsider to the
board," fund industry consultant Roland Meerdter said.

The decision follows a five-month search process led by
recruiting firm Korn/Ferry International.

Sullivan's appointment removes an overhang on the shares and
allows the company to focus on improving flow trends, Sandler
O'Neill analyst Michael Kim wrote in a note to investors.

But the decision also lessens the likelihood of a
private-equity buyout of the company, Kim wrote, as some of the
affiliates had discussed. Given ongoing declines
in assets and uneven performance track records, "we see more
limited upside for the shares," said Kim, who kept his "hold"
rating on the stock.

Legg Mason shares were trading unchanged in price at $27.91
in early trading, after the news was announced.

AFFILIATE INPUT

Legg Mason Chairman W. Allen Reed struck a conciliatory tone
in a statement announcing the appointment, noting that leaders
of affiliates helped in the selection process. Reed said among a
broad list of qualified candidates, Sullivan had the best
combination of management skills and experience.

"Importantly, Joe has developed a relationship with the
affiliate leadership teams that the Board believes will enable a
collaborative and mutually beneficial process," Reed said.

Sullivan said in the same statement that he will work with
the affiliates and others to expand the company from within and
through acquisitions.

Sullivan was seen as the inside favorite for the job by some
employees and had already made changes during his interim tenure
that could foreshadow more to come.

In December, for instance, Legg Mason agreed to buy
London-based hedge fund firm Fauchier Partners for $80 million
plus up to $56 million in future incentive payments.

Legg Mason also renegotiated its financial arrangements with
its Permal investment unit, which Sullivan had previously said
could serve as a model for future deals with other affiliates.

With $654 billion under management at the end of January,
Legg Mason is one of the largest publicly traded U.S. asset
managers, but its shares have lagged those of its peers.

Sullivan's predecessor, Fetting, took over Legg Mason from
founder Raymond "Chip" Mason in early 2008, just at the start of
the financial crisis that hit the company harder than most.
Performance stumbles by one-time star manager Bill Miller also
contributed to net quarterly withdrawals of cash by investors.

Fetting restructured Legg Mason and slashed its workforce to
cut costs. Both moves were in keeping with the usual agenda of
activist shareholder Nelson Peltz, who joined Legg Mason's board
in 2009 and holds about 10 percent of its shares.

A spokesman for Peltz's investment firm Trian Fund
Management said in a statement on Wednesday that the firm is
"enthusiastic" about Sullivan's appointment.

"We believe Joe brings the leadership skills required to
strengthen and expand the capabilities of Legg Mason to create
long term value for Legg Mason shareholders," the statement
read.

It continued that "Trian also believes that Dennis Kass will
bring valuable insights and leadership skills to Legg Mason's
board as it works closely with Joe to unlock Legg Mason's
potential."